CHAPTER FIVE

INTERNA TIONAL RESPONSE TO EAST -WEST ECONOMIC CORRIDOR

The Greater Mekong Sub-region (GMS) is a vast expanse of fertile land with

abundant natural resources that offers the potential for huge market and broad

prospect of co-operation. On the other hand, most of the regions are under-developed,

over-populated and geographically isol<itcd. Besides, almost all the GMS economies

depend on agriculture and industry which are not well developed. As a result, the

countries of the region are opening their economies to foreign participation to

transform themselves into a market-based economy. As the region is brimming with

economic activities and taking advantage of the economic liberal policies adopted by

the GMS countries, various countries like China, Japan, United States, Europe and .-

several other ~eveloped countries as well as international organisations like Asian

Developme"1t Bank, ESCAP and the Mekong River Commission are diverting their

resources to invest in the region's developmental programme. -. .

The GMSprogramme has taken a big leap fOlward mainly because of the

large inflow of foreign capital into Southeast Asia and thus, one witnesses the

governments of the region introducing more economic reforms. Some co-operative

fields and co-operative projects have. already been completed or are about to be

completed, while several other trans-national infrastructure projects have been listed

in the investment plan or loan plan. Donors has been assisting the GMS in almost all

of the sectors at the national,-regional and sub-regional level, including development

policy analysis, human resources development, natural resources and environmental

management, rural development, social development, tourism promotion, trade and

investment promotion, transport and infrastructure development.

According to Asian Development Bank Reports since 1960s upto the 1990s,

Japan has invested about US$ 61.9 billion in ASEAN, while the United States and the

European Union (EU) investment were recorded to be more than US$ 40 billion and

US$ 30 billion respectively and Taiwan about US$ 30 billion. Vietnam and Cambodia

are becoming new investment hot spots of this region. This is clearly indicated by the

change in their inv~trnent policies. Up to 1998 o~ly 'around 56· countries have

invested in Vietnam, but in due course of time the total numbers ,9f investment

projects have risen to 1928. Subsequently, the foreign capital projects being built in

Vietnam have reached US$ 24.4 billion, US$ 6~9 billion i~ Laos and US$ 3.2 billion

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in Myanmar. Every year about US$l million are invested III this region through

international funding.

The GMS have drawn international attention over the years; this is clearly

reflected in the series of the initiatives and progranmes that have been introduced over

the year. The adoption of a resolution on the Decade of the Greater Mekong Sub-

region in Development Cooperation, 2000-2009, placing this sub-region at the

forefront a/the Asia-Pac~fic development agenda in 2000 by the Economic and Social

Commission for Asia and the Pacific (ESCAP) is one such examples (Dr Surakiart

Sathirathai).

Economic and Social Commission for Asia and the Pacific

Economic and Social Commission for Asia and the Pacific (ESCAP) by virtue

of holding its unique position as a United Nations body has played a great role in

GMS for many years. Sisira Jayasuriya reports that since the early 1950s, ESCAP has

been actively engaged in promoting integration of the Southeast Asian region, and

collaborated with the Greater Mekong Sub-region' Economic Co-operation

Programme, the ASEAN Integration initiative and several other regional integration

initiatives (Jayasuriya 2002). One such example of its activities in the Mekong sub-

.. region is .. the establishment of the Mekong Committee by .,ESCAP in 1957. The -- ...

Mekong Committee was established by ESCAP because integrated sustainable

development of the Mekong River Basin has long been a major objective of ESCAP

(PyakuryaI2004: 107-11 1). ,.

Since the early 1950s, ESCAP has been favourably collaborating with various

GMS activities in the region in an un-prejudiced manner. According to Sisira .

Jayasuriya, ESCAP is not perceived as a domineering body that attempts to impose its

particular paradigm on regional governments or societies. It is accepted as a friend

and partner, willing to assist constructively and impartially. Given this favourable

perception, and ESCAP's access to a network of inter-governmental and civil society

contacts in the region, arguably ESCAP is probably the best equipped to play this role

of an impartial mend and arbiter within GMS (Jayasuriya 2002). He further states that

apart from having the advantage to "playas an honest ~roker,"· ESCAP can also use

its technical expertise "to draw on wider regional and global experienc1 and mobilize •

resources." As a result, ESCAP has a natural comparative advantage in facilitating,

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coordinating and assisting activities that focus on regional cooperation and integration

(Jayasuriya 2002).

By the early 19905, ESCAP's assistance in the GMS has expanded to a wide

range of sectors. In particular, ESCAP is currently working with five different

frameworks to provide technical assistance for the development of the private sector

in the sub-region.

1) Forum for the Comprehensive Development of Indo-China

ESCAP has been closely associating with the Forum for the Comprehensive

Development of Indo-China since its inception in 1994. The Forum, an undertaking

initiated and supported by the Government of Japan, seeks to promote sub-regional

development through co-operation among the Indo-China countries, namely

Cambodia, Laos, Myanmar and Vietriam, as well as through co~peration with the "

neighl)ouring countries (China and Thailand) and the international community in

general.

ESCAP's activities under this Forum focus mainly on the development of the

private sector in the sub-region. These activities include meetings of the Private

Sector Advisory Group, net-working among chambers of commerce and industry,

TCDC activitiesiorhuman resources development,-seminars for t.he private sector on

WTO agreements, tourism promotion, as well as Small and Medium-sized Enterprises

(SMEs) development, privatisation and the development of plan of actions to promote

women's participation in economic development in Indo-China. ESCAP has been

implementing various activities under the new phases of the project in the years 2001

and 2002, including i) human resources development for the GMS business sector; ii)

strengthening GMS business associations strengthening; iii) institutional capacity ..

building for trade policy reforms; iv) workshop on corporate strategy and external

investments in the GMS; and v) workshop on Asian economic integration and

international production networks.

2) Advisory Assistance to Industry for Export Promotion

It is a project funded by the Governm~ntof Gennany which aims at increasing

the participation of Indo-China in regional and global trade. The target ,oup is small •

and medium-sized enterprises (SMEs) with export potential in various sectors in the

three Indo-China countries. It concentrates on capacity building within institutions,

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such as business associations to strengthen existing or build new services for local

SMEs with export potential. The activities focus on quality-related issues, such as the

development of integrated services in· quality management for SMEs and services

.aiming at improving quality and productivity. Furthennore, the project assists in

developing or upgrading the export potential of selected sectors, such as the fishery

sector. Efforts also· aim at the· policy level in creating awareness for the need to

improve the framework for exporting SMEs and to enhance government and private

sector partnership in implementing export-oriented development policies. Activities

undertaken are for instance, training of ministry staff in quality management, the

implementation of a capacity building initiative at provincial level and an upcoming

conference on export promotion policies and systems .

. 3JeMS Trade Facilitation Working Group

The introduction of trade facilitation measurement and electronic commerce

techniques are of increasing importance to improve productivity, business

performance and competitiveness at relatively low· costs. Therefore, ESCAP has

placed on increasing emphasis on strengthening trade facilitation measures through its -----'" ... -technical assistance to government agencies and firms. In response to ESCAP's

initiative -in this area, the GMS countries have established a Trade Facilitation •..

Working Group under the GMS Programme to improve efficiencies in the conduct of

international trade in general and GMS cross-border trade in particular. ESCAP and

the Asian Development Bank jointly developed the work programme of the working o·

group, which includes institutional mechanisms; harmonisation of data elements;

information contents; documentation and cross-border procedures; and human.·

resources development.

4) The GMS Business Forum

The GMS Business Forum (GMS-BF), a non-government body, was.

established in Bangkok in October 2000 as an initiative of the national chambers of

commerce and industry of the six GMS countries, with the assistance from ESCAP

. and the Asian Development BanJ<:.. It . aims to promote business activities and

investment in the area by building up the capacity of the local private sjctor, creating

stro~ger linkages between local firms and foreign finns, and enhancing the public­

private sector interface in the OMS, including the major multi-lateral agencies. Its

l56

secretariat, located in Vientiane SInce 2001, IS responsible for providing

administrative, logistical and co-ordinating support for the activities of the GMS-BF,

including the launching of the Internet GMS Business Support Centre, publishing

yellow pages of companies in GMS, etc.

In order to balance the interests of the private business community with the

interests of the governments and other public institutions, the GMS Business Forum

serves as an intermediary.· The GMS Business Forum reviews legislative and

government policies in the GMS with the interests of the business community in mind

and issues and opinions on the timeless and effectiveness of the policies. The GMS

Business Forum works out policy alternatives and conveys· them to the GMS

governments, political parties and other relevant authorities. GMS Business Forum's

services includes: i) business advisory; ii) GMS business support centre; iii)

investment promotion programme; iv) export promotion programme; v) support to. the

visiting trade delegations; vi) sending trade missions; and vii) managemf"1.t and

vocational training.

5) The Working Group on tlte Greater Mekong Sub-region· Tourism Sector and the Mekong Tourism Forum

The Working Group on the Greater Mekong Sub-region Tourism Sector has

been established through joint efforts of ESCAP and ADR. The Working Group,

comprising national tourism organisations, private sector and international

organisations, aims to facilitate implementation of the following priority tourism

programmes: i) destination marketing; ii) sub-regional events; iii) training; iv)

management of natural and cultural resources; v) Mekong/Lancing River tourism

development; vi) facilitation of travel; vii) village-based tourism; and viii) GMS

tourism flows.

ESCAP, together with ADB, has been collaborating with the Pacific Asia

Travel Association (P A TA) in organising the Annual Mekong Tourism Forum. The

Forum provides a platform for the public and private sectors to discuss sub-regional

tourism issues. It also provides excellent networking opportuQ.ities for national

tourism industry. ESCAP's recent initiatives have included the meetings of the .

Working Group, National Seminars on Sustainable Tourism Development and

Workshop on Development of a National Eco-tourism Strategy for '~ietnam and a

Seminar on Expansion of Tourism in the Greater Mekong Sub-region through

Improved Air Transport.

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Moreover, ESCAP, as the main general economic and social development

centre for Asia within the United Nations system has the responsibility for monitoring

and supporting the implementation of global mandates, programmes, action plans and

multi-lateral agreements at national level. These responsibilities naturally extend to

activities in GMS. This opens up enonnous opportunities as well as major dangers

. and challenges. In tenos of ESCAP's three core themes, poverty alleviation is bound

up with (though not confined to) achievement of rapid and sustainable economic

growth. In tum, this is clearly bound up with managing globalisation and many of the

emerging new social issues in the region-such as drug and people trafficking,

HIV / AIDS are also very closely linked to the rapid pace of economic and social

transformation that is under way and the related movements of goods and people.

European Union

The European Union (EU) which emerged amidst great disaster at the .

aftermath of the deathly Second World War is "the oldest and most ambitious"

regional organizations intl.!e world (8arryand Keith 2000: 10). It is known for the

successful implementation of its single market and single currency. A unique

character of the EU is that it tries to help those less-developed areas within the Union,

so as to enable them· to "become more competitive and be~able to participate in the .,'

development of the Union as a whole" (Jora 2004: 96-97)~ That is why Silviu Jora is

of the view that, "GMS countries can learn the idea of the regional economic

integration from what the EU experienced, in order to solve regional poverty" (lora

2004: 96-97). According to him the EU way of functioning is the most efficient way

for forging alliances on topics. of common interest: co-operation between

neighbouring regIOns with respect to infrastructure and innovative services;

development corridors; development of rail~ inland waterway and maritime transport

and cultural co-operation.

Historically, the first meeting between ASEAN and the European Economic

Commission (ASEAN-EEC) was reported to have taken place only at the Foreign

Ministerial level in Brussels in 1975. And the First ASEAN-EEC Joint Declaration

(Brussels) W8;S signed as late as November 21, 1978. According to the agreement the

two groups exchanged extensive views regarding 1) International relations, 2) . .

Regional integration and co-operation, 3) Economic relations, 4) Trade, .5)

.. Commodities, 6) Investments, 7) Transfer of technology, training programme and

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.'

scientific co-operation, 8) Development co-operation, 9) Cultural co-operation and

10) Framework of co-operation (Saengchantr 2002: 7). Subsequently, the economic

co-operation between ASEAN and EEC was started in 1980.

For the implementation of the projects, Joint Co-operation Committees were

established for the borders with the neighbouring countries. The following fields have

been and will be financed from EU PHARE funds: Improvement of the existing

transport infrastructure; promotion. of the environmental protection, especially water

resources management; free flow of persons, services and goods through the border

crossing points; Socio-economic regioncl. development through the Small Projects

Fund.

There is a striking similarity of priorities between the EU. financed cross­

border programmes and those applied in the MDS such as the improvement of

transport infrastructure, water management and the simplification of border

. procedures for free flows of persons. The agreements signed since 1999 by the 6

Mekong countries on reducing non-physical barriers to the free movement of goods

and people across their borders are very important. It is also highly relevant that GMS

countries have agreed to pilot test single-stop customs inspection procedures at

selected border crossing. Ideas like promoting the sub-region as a single tourist

. destination and to work towards the possible- establishment of a ··GMS visa are also

very suggestive while rather difficult to implement at this stage.

More recently the 1 i h GMS Ministerial Conference highlighted· the

importance of speeding up the priority of trans-border projects, including road project.

. As a result, all mainland Southeast Asian countries would be linked by 2007 when all

sub-region infrastructure. initiatives in Mekong countries are expected to be

completed. In this respect, the EU regional policy in transition countries III the

framework of the new neighbourhood cross-border programmes can provide some

very useful models for regional development in Southeast Asia ahd other areas of the

world.

The Chinese Responses

The Yunnan province of China shares its border with Myanmar, the Lao PDR,

and Vietnam. Being land-locked and situated far away from the/ economically

prosperous mainland area, the Yunnan province's economy did not witness any

significant changes despite China opening up to economic refonn. However, taking

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advantage of the Yunnan's geographical linkage with the Southeast Asian region, in

the early 2000s, the Chinese government "introduced an open economy policies,

autonomous exportation and importation activities in Yunnan" to develop the interior

Yunnan province (Limskul and Taniguchi 1996: 15). In the line of this policy,

Chinese central government established national and provincial economlc

development zone to attract foreign investment 'by authorising "the provincial

government to approve the investment projects not exceeding 10 million US$ and

other prefecturial government in Yunnan province not exceeding 3 million US$,"

(ibid: 14). It is alleged that the main reason for China's participation in GMS co­

operation is to develop China's landlocked western provinces~ This change of China's

foreign policy was perceived as the direct result of the change in the nature of world

politics from being determined by military alliances in the pre-cold war era to being

determined by the market economy in the post-cold war.

Jom Dosch and Oliver Hensengerth (2005) stated that "China's interests in the

Mekong region can roughly be divided into two realms of importance: those of the

domestic and" foreign policy. The domestic ·interest· consists in the development of

China's western landlocked provinces and the promotion of border trade with the

adjoining countries, Burma, Loas, Vietnam." They further stated that as far as

Beijing's foreign policy strategy is concerned, GMS sery~s China's interest of

strengthening relations with ASEAN in the policy areas of political, social, economic

and security cooperation and can be used as a vehicle to promote the development of

the proposed China-ASEAN Free Trade Area. The development of the China's

landlocked Yunnan province is equally important for the people of Yunnan because of

the fact that "the distance to the sea at LaemChabang" in Thailand or the Gulf of

. Mataban in Myanmar is shorter than the same distance to the eastern coast of China"

(Krongkaew 2004: 980).

After the end of the cold war, China's foreign policy mainly focuses on

attracting trade and investment in its Southern province, signing various agreements

with the Southeast Asian countries. For instance, the signing of the Draft Agreement

on Commercial Navigation on April 20, 2000 by the ministers of the PRC, Lao PDR,

Myanmar, and Thailand on Lancang-Mekong River is one such example. This

agreement, which comes into effect in June 200 I agreed to facilitate feer flows of '"

goods and people as well as facilitate trade ~long the Lancang and Mekong River.

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Subsequently, in November 2002 China signed the Framework Agreement on China~

ASEAN Comprehensive Co-operation and in October 2003 joined the Treaty of

Amity and Co~operation in Southeast Asia, becoming the first non-ASEAN signatory

to the treaty. At the same time ASEAN also became the first regional organisation to

maintain a strategic partnership with China; Speaking at the Sixth China-A SEAN

Summit on II, April 2002, Chinese Premier, Zhu Rongji stated that China will give

Most~Favored~Nation status to the three non-WTO members of the Southeast Asia

region (Viet Nam, Laos and Cambodia) "and train about 500 IT professionals of

ASEAN. 1 Bilaterally, in 2002, China had assured Laos to provide $30 million in

interest-free loan and grant to improve the road in Laos as part of the Kunming­

Bangk9k Road project. Further, China agreed to provide funds for the comprehensive

renovation "and construction of the Kunming-Hekou Railway in support of an early

connection of the" Pan-Asian Railway. China is also providing Zero Tariff Treatment ""

for the majority of their exports to China coming from less developing countries of

the region like Cambodia, Laos and Myanmar (Zhu Rongji 2002). Further, China had

also signed an economic co-operation agreement with Malaysia which include a $ 400

million railway projects.

With Thailand, China agreed to signa MOU to explore the feasibility of joint

investment in laying transmission lines so that excess power".can be sold by China to

Thailand (Panitchpakdi 2001: 265-273). Former Thailand Deputy Prime Minister and

" Minister of Commerce (1997-2001) Supachai Panitchpakdi, (2001) optimistically

stated that "the sub-regional project offers a great opportunity for China to expand her

trade with other GMS countries as the region has a" huge market, with a total

populations of about 250 million and an overall Gross Domestic Product (GDP) of

about 190 billion USD." The change in China-ASEAN relations was clearly

manifested in its economic relations. Chinese Premier, Wen liabao (2006) stated that

China trade had grown from merely "eight billion U.S. dollars in 1991 to over 130

biliion U.S. dollars in 2005" and by the end of 2005 "ASEAN countries had set up

close to 30, 000 investment projects in China, with a total investment of about 40 .

billion U.S. dollars."

I The then Pre~ier of the P~ople's Republic of Chirnl; Zhu .Ron~i in his. address to lhe Sixth China­ASEAN Summit (II, ApnI 2002), stated that China WIll give speCial economic status to the Southeast Asian countries. For detail speech see, Zhu Rongji (2002), "Pushing Forward China­ASEAN Relations into A New· Stage of All-round Development," Speech of His Excellency, Mr. Zhu Rongji Premier of the People's Republic of China at the Sixth China-ASEAN Summit on 11, Apri12002, http;llwcm.fmprc.gov.cn/zdjnleng/Z)'\\j/t270551.htm

161

China not only tried to develop its relations with the Southeast Asian countries

economically but politically and militarily as well. The signing of a Land Border

Treaty with Vietnam in December 1999 and the signing of the Agreement on the

Delimitation of the Territorial Seas, Exclusive Economic Zones, and Continental

Shelves in the Gulf of Tonkin and the Agreement on Fishery Co-operation in the

Beibu Gulf on December 25, 2000 is a clear example of such policy. In March 2005,

national oil companies from China, the Philippines, and Vietnam signed -a landmark

agreement to conduct joint prospecting for oil and gas in the South China Sea (Wen.

liabao 2006). Kuala Lumpur and Beijing also signed a memorandum of

understanding on maritime co-operation in August 2006.

China and Vietnam have had a checkered relationship over the last five

decades but have been fruitful. Between the 1950s and 1970s, Beijing was a strong

supporter of Hanoi's anti-French and anti-American causes, both providing significant

3I~ounts of materials· (RMB ¥20 billion) and sending over 320,000 PLA air defense

and engineering corps troops to the North. Bilateral trade also flourished, growing

from U.S $32 million in 1991, to $3.6 billion in 2002, and continued to grow,

registering a record of$8.2 billion in 2005 (Wen liabao 2006)

China relations with Myanmar began as late as 1990s. Taking advantage of the

economic and military sanctions imposed "on the military junta by the international . "-.,. .".

community in the wake of its ruthless suppression of the country's democratic

movement, Beijing provided up to U.S. $1.4 billion in conventional weapons to the

State Law and Order Restoration Council (SLORC)," which consists of "ground­

based radars, anti-aircraft guns, small arms, 24 F-6 and F-7 fighter aircraft, 100 T-69

II main battle tanks, 100 T-63 light tanks, 150 T -85 armored personnel caniers, 144

air-to-air missiles, and four patrol boats." Besides, it was reported that a naval base on

Hainggyi Island as well as setting up intelligence gathering posts on the Coco Islands

was assisted by China (Wen liabao 2006).

In 2002 China and Indonesia signed a Memorandum of Understanding (MOU)

leading to the emergence of the Indonesia-China Energy Forum. Three years later in

April 2005 Chinese President Hu Jintao visited Jakarta and signed an agreement of

strategic partnership with Indonesia, During Hu's visit, President Hu lintao also

assured Indonesian leaders of "$300 million in preferential 1031:1; promised to •

facilitate a $10 billion investment in Indonesia's private sectors, and expanded

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cooperation in joint efforts to combat smuggling and maritime piracy" (Wen liabao

2006).

Thailand officially recognised China in 1975. Since then, the relatioqs

between the two countries have moved on to positive note. Thailand was said to have

received various sophisticated weapons like "500 T-69 tanks, some 1,160 T-S31

annored personnel carriers (APes), and lianghu-class frigates" from China. It was

also reported that "Beijing also made "friendship" priced offers to Bangkok for the

transfer of anti-aircraft· missiles, diesel-electric Romeo-class submarines, and F-7

fighter jets." In 1989-1990, "'China transferred 200 T-69 main battle tanks (MBTs) to

Thailand and in' 1991, began delivery of the four 1,800-ton lianghu-class frigates

ordered by the Royal Thai Navy." China is now recorded to be the third largest

trading partner of Thailand. China assistance to 1.baiJand during the Asian economic

· crisis is worth. mentioning. "C.hina contributed $1 billion to the International

Monetary Fund (IMF) for resc:::e efforts during the 1997 financial crisis and extended

the Early Harvest Programme to Thailand in the China-Thailand Free Trade

Agreement, where Thai· agricultural produce is given preferential tariff treatment"

(Wen Jiabao 2006).

Speaking at the Summit marking the ISth Anniversary of the Establishment of

China-ASEAN Dialogue on October 30, 2006, Chinese Premier Wen Jiabao, Zhu

· Rongji's successor reiterated China's support to the Southeast Asian countries and

assured to donate one million U.S. dollars to the ASEAN Development Fund and

· provide funding assistance of one million U.S. dollars for the relevant projects under

the initiative for ASEAN Integration. China would also further train 8,000 ASEAN

professionals and invites 1,000 young people from ASEAN countries to visit China

(Wen Jiabao 2006).

ASEAN leaders on the other hand have always tried to engage China in their

effort to encourage regional peace and security. A clear manifestation of this policy

was the initiation of the management of potential conflicts in the South China Sea in

1990, which is an important strategic location of EWEC. They also want China's

political backing for its emergence as the primary driving force in regional affairs.

But, in tenns of regional affairs the involvement of China has often alerted major

powers, especially Japan and USA. Yao Chaocheng (2008) was o~ the view that "

China emerging in the political structure of Southeast Asian region directly

challenged US traditional strategic interest in Asia. Even some ASEAN members

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expressed reservation about the involvement of China into the regional" politics with

the fear that the Chinese presence may dilute ASEAN objectives. They viewed that

China will rise to become an intimidating superpow(!r and a challengin.g force to the

international order" (Chaocheng 2008: 101).

Even Thailand, which is the most developed country in the region, too was

cautions in the beginning when the idea of opening up its north em border with Indo­

China neighbours and China was proposed fearing that influx of cheap goods and

services from China would dominate over local products. However, with the change

in the world politics and the rise of China as an industrial power, especially after its

entry into WTO, the leaders of ASEAN regarded China entry into the sub-regional co­

operation as an opportunity rather than a threat.

Many scholars and policy makers concluded that China's interest 111 GMS

programme (EWEC) liesbeyond economic interest. They felt that Chinese interests in

the region were more of an outcome of Chinese policy' makers' comprehensive

security strategy to prevent other external power intrusion into the regional politics.

Historically, a sensible strategy for a big power is to build a long-term and solid moral

and economic basis and wait to be invited in, rather than force its way in. The best

diplomacy is to arouse enthusiasm among countries by dealing with them in a way

that-makes them feel impo11ant and appreciated, engaging th.em ·without making them

feel manipulated, making them feel that the ne\v relationship is their own initiative

and in their own interest, winning them over brradually without causing offence. China

is on the learning curve now.

India

Though India had close historical and cultural ties with Southeast Asian countries for

centuries, it was only after 1991 that India made a conscious effort to reach ASEAN

countries under its· "Look East policy" (Saengchantr 2002: 2). For decades the

Southeast Asian countries failed to attract India's policy makers' because Indian

foreign policy mainly focused on Pakistan. The change in the world political

environment in the late 1980s, the end of Cold War and the "stagnation in the SAARC

process" prompted Indian policy makers to diversify its foreign policy towards the

Southeast Asian countries.2 Ambassador G. Parthasarathy expressing his view on

2 Ambassador G. Parthasarathy stated that the failure ofSAARC compelled Indian policy makers to look towards the East Asia for economic cooperation; Ambassador G. Parthasarathy, "India's

164

india's "Look East" policy stated that, "the rationale for India's economic integration

with the East and Southeast Asia economIes emanates from the urgency of

overcoming its economic autarchy."

On the other hand, ASEAN members reciprocated India's "Look East" policy

by recognising India as a sectoral dialogue partner in 1992 and as a Full Dialogue

Partner in 1995. Simultaneously, India was invited to join the ASEAN Regional

Forum, a multi-lateral security dialogue platfonn, enabling India to significantly

establish and deepen its relations, politically and economically with other Full

Dialogue Partners of ASEAN, namely, Australia, Canada, China, European Union,

Japan, New Zealand, Republic of Korea, Russia and the United States (Saengchantr

2002: 2). Having felt the importance of developing its relations with the ASEAN

countries in 1994, the then Prime Minister of India, Narasimha Rao, delivered the

. "Singapore lecture" addressing the significance of the relationship with countries in

the Asia-Pacific region.

The Phnom Penh ASEAN Summit held in November 2002 cari be regarded as

a watershed, as it divides the development of India-ASEAN relations into two phases.

In the first phase, India-ASEAN relations were mainly tentative and partial. India at

this time focused largely on building up her relations with individual ASEAN

countries, with different emphasis and values fo~ each. For example, in the_trade,

investment, and scidlce and technology Research & Development dimension, New

Delhi had stronger rellitions with Singapore, Thailand and Malaysia; in the defence

and strategic dimension, India put much stress on her relations with Vietnam and

Myanmar; in the area of natural resources co-operation (with energy co-operation in

particular), India paid much attention to her relations with Indonesia, Malaysia and

Myanmar; while with regard to security co-operation, especially in combating co­

operatively against anti-government forces, India attached great importance to her

relations with Myanmar and Vietnam. Besides, India has selected Myanmar and Indo­

Chinese countries to be its major recipients of economic assistance.

The most outstanding feature of India-ASEAN relations in the first phase is

the focus on economic co-operation and trade promotion. In the second phase, the

relations between India and ASEAN were much more comprehensive and more

institutionalised. India's participation in· the Phnom Penh ASEAN Summit in . ,I

Neighbourhood: Economic and Political Development," http://www.ipcs.org/printlndiaArticlejsp ?action=showView&kValue=2258&statlls=article&keyArtic!e=IO15 ..

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November 2002 and the initiation of both "India-ASEAN Summit" and "India­

ASEAN Business Summit" have all marked the great-leap-forward of a decade-long

"Look Easf' strategy. It signifies in at least. two aspects. One is that ASEAN has

acknowledged the economic, political and strategic importance of India; the other is

that ASEAN would very much like to deal with India collectively and in unity.

Although the second phase of India-ASEAN relations has just started, there already

exist three outstanding features:

1) Institutionalisation of Economic Relations

Whether it is the FT A arrangement between India and ASEAN· as a whole, or

one between India and individual ASEAN members such as Singapore and Thailand,

both sides ~ave given high priority to a systematic and institutionalised way to .. -

strengthen their economic and trade interactions. The purpose behind such efforts· is

that both sides want to take advantage of the large-scale effect and mutual

complementary pre-dominance in their economic and trade developments.

2) Broadening the Fields of Co-operation

Both sides have decided to include anti-terror issues into their co-operation.

Jlldia-ASEAN defence diplomacy has moved gradually on a fasftrack. Joint military . .

exercises, joint patrolling, joint production of certain weapon systems, and joint R&D

in the dual-use teclmologies have been steadily regularised. India and ASEAN have

also stepped up their efforts in jointly tackling non-traditional. security issues,

especially in strengthening their co-operation on the safeguard of SLoes and

combating terrorists and sea-borne pirates. Considering India's unique geo-strategic

position, greater globalised political and economic influence and being the fourth

strongest military force, the widening of bilateral co-operation areas is the inevitable

result of the rapid development of India-ASEAN relations.

3) Accelerated Pace of Constructing Physical Connections

Although the construction of physical connections-road, railroad, shipping and

air interlinks-between India and ASEAN started in the first phase, it is in the second

phase that such construction has picked up speed. India has made un-remitting efforts

to participate in the building up of comprehensive linkages with AsIiAN, including

India-Myanmar-Thailand highway linkage, New Delhi-Hanoi and further stretching

166

into the inner-land of Malaysia railroad connection, the Dawei (avoy)-Kanchanaburi

road link for ocean-cum-overland inter-modal transit from Indian ports to Myanmar

and Thailand, a new plan to link th~ Andaman Sea and the Gulf of ll1ailand with an

oil/gas pipeline, and to link Port Blair of the Nicobar Islands with Phuket in Thailand

in a tourist circuit. Besides, more airline linkages among Indian and ASEAN

metropolitan cities are also under consideration. Former Indian Prime Minister

Vajpayee declared in the Second India-ASEAN Summit in October 2003 that India

would offer a unilateral "open skies" policy to specified Southeast Asian airlines,

which will be free to operate daily flights to the Indian metropolitan centres, outside

any bilateral aviation pact. In this context, he announced India's unilateral decision to

connect all ten ASEAN capitals with four metropoles ~ew Delhi, Kolkata, Chennai

a~d M umbai) in India through daily flights without further bilateral discussions.

Indi a's geographical proximity to ASEAN, her pervasive historical, cultural

and religious influence in ASEAN and especially the presence of large population of

people of Indian origin (PIO) in the region enabled India to develop closer relations

with ASEAN (Yahya 2003). The .primaryobjective and immediate drive of India's

"Look-East" policy is economic consideration. At the time when the "Look-East"

policy was put forward, the Indian economy was just· on the verge of bankruptcy with

only US$ 1 billion in foreign exchange reserves (affor-ding only tw~ weeks' imports).

Indian economists and businessmen during that period had been profoundly impressed

and influenced by the "miracle economies" of Asia, especially Southeast Asia.

Indeed, no other global phenomenon has had a greater impact on the thinking of

India's economists and economic policymakers during that time than East Asia and

Southeast Asia's rapid economic take-off.

When Manmohan Singh (the present Indian prime minister) started India's

economic refonns with marketisation, privatisation and liberalisation as its core

content, ASEAN was regarded as a source of both ideas and capital for the

development and modernization for the Indian economy. More importantly, there is a

mutual recognition of a complementarity-competitiveness continuum between the

emerging ASEAN and Indian economies. India's assets include its large diversified

and liberalised economy, huge reservoir of man-power and high-quality but cheap

scientific talents, natural resources, industrial base and one of the Ijgest, rapidly

growing markets, while ASEAN's strengths are demonstrated by its rich natural

resources, know-how, infrastructure, social sector development, investible capital,

167

"

elaborate regional and local linkages in trade and industry and large market. In this

sense, New Delhi hopes that stronger economic ties with the ASEANstates would

enable it to benefit from tl:Ie dynamism of the larger economic bloc, and enhance

India's comprehensive economic strength. The Indian Government even regard

ASEAN as an indispensable partner for India in its quest for new global 0ppoltunities

and a 7-8 per cent growth rate (India, Ministry of External Affairs, Annual Report

1998-99, 2000).

The benefit for India to strengthen her economic ties with ASEAN is firstly

demonstrated in the increase on bilateral trade volume and frequent economic

exchanges. India imports from ASEAN countries mainly vegetable oils, data

processing machines, natural rubber, transport equipment, organic chemicals, textile

yarns, timber, etc., while exports from India to the ASEAN countries cover the

following sectors: Pharmaceuticals, computer software, textile machinery

components, rubber manufacture, leather goods, agro-products, metal scrap, animal

feed, gems and jewellery. With the rapid development of hi-tech industries and

services, India finds a much larger cooperative field with ASEAN. The Indian

Government hopes that India's industries of comparative advantage such as IT,

pharmaceuticals and biological technology would help India to expand her market

share in ASEAN. At the same time, such clQse economic interactions would enable , .,

India to introduce advanced administration modes and ideas from ASEAN countries.

In recent years, the India-ASEAN anns trade has become an increasingly , '-

important part of bilateral trade. Since the 1990s, India's comprehensive capability in "

R&D in advanced weapon systems has improved substantially. Compared with

ASEAN countries, India's weapon systems are not only good in quality, but also

inexpensive. Especially with the opening up of the defence production sector for

private participation, there is a great scope for Indo-ASEAN cooperation in R&D. By

actively participating in the maintenance, upgrading and renovating of the existing

weapon systems in some ASEAN countries, India has greatly broadened her defence

co-operative ties with ASEAN, and also its share in ASEAN's conventional weapons

market. At present, Vietnam, Malaysia, Thailand and Indonesia have very close

defence co-oper~jon and arms trade relations with India.

Secondly, there is rapid increase in mutual investment India's economic

relationship with ASEAN also encompasses an active investment ·~omponent. In

recent years, ASEAN countries are increasingly investing in primary infrastructure

168

sectors, such as roads and highways, tele-communications, ports and ·airports and

tourism, in India. From a negligible investment in 1991, ASEAN investment

approvals tod~y in India total over US$ 2.5 billion, with Singapore, Malaysia and

Thailand taking the lead. Moreover, ASEAN accounts for a large· volume ofIndia's

investments abroad. The Southeast Asian region is host to a number of Indian joint

ventures. Major areas of Indian investment are software development, gems and

jewellery, manufacturing, textiles, chemicals, minerals· and metals, among which,

infrastructure and telecommunications. form the thrust areas of co-operation in

addition to the traditional high technology sector and pharmaceuticals: Major

government engineering firms from India such as the Bharat Heavy· Electrical Ltd

(BHEL), Bharat Electronics Ltd (BEL) and private IT majors such as Infosys and

WIPRO have all invested in Malaysia (Bhattacharjee 2003). Besides, the top twenty

Indian information-technology (IT) companies have a presence in Singapore (atimes

2004) .

. More importantly, with the final formation of an ASEAN Free Trade Area

(AFT A) by 2008, and with the final materialisation of a preferential tariff system

known as the Common Effective Preferential Tariff (CEPT) scheme, by the year

2008, the tariffs of fifteen items of goods in ASEAN (vegetable oils, cement,

chemicals, fertilisers, pharmaceuticals, plastics, lllbber products, leather products, •

pulp, textiles, ceramic and glass products, gems and jewellery, copper cathodes,

electronics, wooden and rattan furniture) would be reduced by a great margin. Indian

companies would do well to take advantage of the reduced tariffs by establishing joint

ventures in the ASEAN region, since India enjoys great advantage in most of the

above items.

Last but not least, with the diversification of India's energy strategy, Indian oil·

and gas companies are helping Vietnam and Myanmar to explore and exploit

petroleum and natural gas. In November 2003, a consortium of South Korean and

Indian companies started exploring the waters off the Arakan Coast of northwestern

Myanmar. The estimated recoverable reserve of gas is in the range of four to six

trillion cubic feet equivalent to between 700 million and 1.1 billion barrels of oil. It

has been accompanied by a blueprint that suggests that the gas will be taken in!o inner

India through an undersea link connecting the Myanmar gas fields to the east coast·

and an overland line through Bangladesh into northeastern India o/West Bengal

(Mukherjee 2004). India companies also participat~d in oil exploitation in Indonesia.

169

On 8 February 2004, economic and foreign ministers from the BIMSTEC

countries, Jed by India, signed a draft agreement that paved the way for the

esta~lishment of a trade zone linking India with Southeast Asia. The agreement caIls

for tariff reductions and the creation of a new free-trade area by 2017. All these

efforts have greatly promoted the economic development and social stability in the

northeast region. As an Indian scholar, Raj Reddy once pointed out: "New Delhi's

ambition is to change the whole northeast region into one standing point for India's

economic entry into ASEAN" (Latiff2004).

Moreover, in order to deal with the insurgencies effectively, New Delhi has to

attach more importance on the improvement of bilateral relations with Myanmar.

India and Myanmar share a 1,650 kilometers border between northwesteol Myanmar

and India's troubled northeastern states. Among the four states bordering with .

Myanmar, three have been for a long time troubled by armed s~paratist unrest, and the . "

rebel forces usualJy escape the hot pursuit of the Indian Army by disappearing into

Myanmar. It is said that the" northeast military separatists has the protection of the

rebel forces in Kachin, Myanmar.

Since the mid-1990s, India has greatly modified her policy toward Myanmar

and stepped up her co-operation with Rangoon's military junta. One of the purposes is

to ask the Rangoon government to curb infiltration by Northeast separatists and flush .

out their camps there. The primary measure in this regard is to constantly give

generous economic assistances and soft loans to Myanmar. In 1997, India provided

Myanmar with US$ 10 million in soft loans; in 1998, US$ 25 million; in 2001, ,"

another US$ 25 million; and in 2003, India agreed to provide US$ 57 million credit

loan. Most of these loans have been invested into infrastructure sectors. By the end of

2001, the Mora-Kalimu road in the western region of Myanmar was completed under

the Indian assistance. On 6 April.2002, India's External Affairs Minister Jaswant

Singh visited Myanmar to launch a trilateral highway project linking Thailand and

Myanmar with India, which is expected to be completed in two years. India has

provided 1 billion rupees for this grand project.

India's "Look East" policy is certainly on the economic, security and political

interests of the ASEAN region. Economically, closer relations betw~eri ASEAN and

India benefit ASEAN in its regional economic development. The econojic interest is,

in fact, the immediate motivation behind the ASEAN-India mutual approach.

Singapore's then Prime Minister Goh Chok Tong, while interpreting ASEAN's new

170

perception on India's economic role in this region, pointed out in a metaphor that if

ASEAN were a huge plane, China and India would be the two wings (Baruah 2003).

This metaphor itself reveals vividly the great importance of India to ASEAN's

economic prosperity.

There are at least three kinds of gains from the close economic relations

between India and ASEAN. First of aU, the under-developed ASEAN region has

benefited a lot. India's '~Look East" policy could not bypass the less developed

members of ASEAN (Myanmar, Vietnam, Laos and Cambodia). Moreover, this

geographic location has also provided India with the advantage to playa very positive

role in these four countries and hence in the whole ASEAN region. So, in this sense,

the. less developed countries of ASEAN are inevitably the direct beneficiaries of , ,

India's Look East poiicy, compared with other ASEAN members. For Myanmar,

Vietnam, Laos and Cambodia, they are most eager to change their backwardness,

especially of their infrastructures, but they lack the much needed foreign capital and

science and technology, which an emerging India could provide; In fact, in recent

years, India's sub-regional co-operation mainly focused on these four economically -backward ASEAN members. In November 2002 at the First India-ASEAN Summit,

India promised to provide the four countries with privilege substantial tariff reduction. '"

Besides, ,-these four countries,-in particular Myanmar, hav~ in these years benefited . . . substantially from Indian economic assistance and govemmental soft loans. The large

. scale infrastructural constructions completed or undertaken in this region are the best

evidence.

Secondly, the formation of a super large integrated market is being

accelerated. With the' completion of various transportation networks undertaken in .

ASEAN, South Asia, East Asia and Southeast Asia would be gradually fused into one

united geographical community. And still in the future, when India-ASEAN

transportation networks finally connect with China-A SEAN ones,a super-size market

with its population of three billion and GDP of US$ 2.5 trillion would come into

being. By that time, the flow of goods, capital, people and ideas would become faster

and there would be huge economic and peace dividends for all of the members, a

blessing especially to 'ASEAN countries. ASEAN COUld. certainly make full use of its,

advanced and applicable technology, rich capital, abundant commercial experiences

and high efficiency of administrations to benefit greatly from sue' an enormous

market. Such a huge market is especially conducive for ASEAN to sharpen the edge

171

of its goods in the international markets. Besides, ASEAN would witness a great

increase in bilateral trade with China-ASEAN FTA. It is predicted by experts that

both China and ASEAN would witness a 50 percent increase of their two-way trade

volume. In fact, in the first year of the China-ASEAN trade agreement, bilateral trade

hit a record high of US$ 78.25 billion, an increase of 42.8 percent year-on-year,

according to Asia Pulse (Morris 2004). In the past ten years, with bilateral economic

relations being increasingly close, the bilateral trade volume between ASEAN and

India has increased by 16~5 percent annually, much higher than the growth rate (6

percent) of the general ASEAN trade with the outside world.

Further, such a huge market would facilitate ASEAN investors to seek more

lucrative places and areas for investments. Here, the Indian market itself is worth

mentioning. India has 200-300 million middle class people with a total population

standing a~ one billion. The average tariff of India has reduced dramatically from 300

per cent in 1991 to 25 percent presently. In future, ASEAN would find it much more

profitable to invest into such a big emerging market, (Latiff, 2004) especially in the

infrastructure sectors. Since India's infrastructure construction lags very much behind,

the Indian Government intends to carry out big energy and transportation projects

with the help of FDI. In fact, in the past years, ASEAN businessmen have been

putting large-sums of FDI in India in crucial infrastructural sectors such as roads and

highways, tete-communications, ports and airports, and tourism. ASEAN has indeed ,

become a major player in the FD I stakes in India with Singapore, Thailand and

Malaysia in the lead.

The third gain IS the speeding up of FT A negotiations and its final

establishment. The frequent interactions between India and ASEAN have served as a ..

catalyst in this regard. At present,·. more and more outside powers are eager to reach

FTA arrangements with ASEAN. China, Japan arid India have already signed FT A,

while the United States has also reached a bilateral FTA with Singapore in 2003 and

is currently working on similar deals with Thailand and the Philippines. Japan, New

Zealand and Australia have also signedFTAs with Singapore. Finally with free-trade

agreements (FTAs) to be completed with China in 2010, India in 2011 and Japan in

2012, the ASEAN region would be transformed into a giant free-trade zone by 2020.

The FT A arrangements and finally the formation of certain con~mon economic

community would enable ASEAN to combat with more confidence/and successes'

against any form of fmancial crisis similar to the 1997 financial crisis, and other'

172

external challenges. However, the economic linkages between Southeast Asia and

Northeast Asia are far closer than India-ASEAN economic relations. The trade

volume and investment volume are self-explanatory. The India-AS~AN trade volume

in 2003 only account for two percent of the total volume of ASEAN trade with the

outside world, while ASEAN-China's trade account for eighteen percent of ASEAN's

total foreign trade.

Southeast Asia is much diversified in the sense of culture, civilisation,

religion~ language, etc. There is no even distribution of wealth or equal levels of

economic development There is also no political system that is common to all. Th~

historical legacies and mutual suspicions among ASEAN members themselves and

between ASEAN and its neighbours, particularly with the great powers, are too

obvious to be ignored. In this regard, the key detenninants of regional security would

be the balance of power and the nature of relations between the great powers, rather

than any regional institution. This political logic and grim geographic reality has

forced ASEAN to develop strategic relations with as many big powers as possible.

India's "Look East" policy has greatly facilitated ASEAN's effort in this regard. At

present, nearly all the significant big powers in the international arena have built very

close relations with ASEAN. The geo-strategic environment of ASEAN is one of the

-hest in history. The other concomitant-Of India's "Look Ea~t" policy is that with more

big powers entering Southeast Asia, ASEAN's international political influence has

also become substantially enhanced. Nowadays, ASEAN is more like an important

co-ordinator among big powers. It also act as a shock-absorber which helps to pacify

the big powers in their disputes.

Lastly, India's "Look East" policy and its practice would be helpful for the

construction of political democracy in ASEAN, especially for ASEAN countries to

tackle their ethnic, religious and even political problems. Most ASEAN countries face

a common problem i.e. how to build stable, tolerant and secular state structures under

conditions of multi-ethnicity, multi-religion and externally-induced complications. In

this regard, India may be ~ valuable source of lessons and experiences to ASEAN. In

recent years, a positive development in this regard is ASEAN's modification of its

traditional "non-interferenc,?" foreign policy, which is demonstrated by the fact that

due to the implicit pressure of some ASEAN members, Rangoon hal changed its

harsh and rigid attitude towards Aung San Suu Kyi. In short, the'India-ASEAN

mutual approach has proved, and would still prove, to be a blessing for both sides.

173

For years the Northeastern part of India has been completely ignored by the

government of India and till late 1980s the Northeastern states never existed on the

radar of Indian government. Though the region has huge natural resources and

abundant men power, most of the states in northeast India lack the capability to

develop, even to live, on its own resources. As a result, the economic growth rate of

the northeast region is far behind the average national level, so northeastern India is

also call "India's back lake" (Zhengjia 200 I).

However, the failure to control the insurgency in the region and the change in

. the political environment of the world compelled Indian government to change its

. policy towards the North~ast. By early 1990s, Indian government was projecting the

Northeast as the gateway to ASEAN countries mainly for two reasons. First, Indian

government believes that in order to curb one of the "world's longest-running

insurgen'cies," the region has to be developed and development of the region could

. come about by linking the Northeastern region with'the ASEAN countries. This is

done keeping in view of the geographical proximity,cultural similarity and historical

linkage the northeastern states have with the South East Asian countries. The simple

fact is that 98 percent of the northeastern states share border with foreign countries

and lies in close proximity to one of the fastest growing economy, i.e., the Southeast

Asia. Another reason behind the move was to enhance the economic developmenLof

the country as a whole.

As a result,a series of sub-regional economic co-operation organisations,

which involves both northeast India and the adjacent countries and regions, like the

Indo-ASEAN, BIMSTEC, India-Thailand, India-Singapore trade agreements came

into being. The formation of SAFT A further helps to boost up trade relation of this

region with China, Myanmar, Bhutan and Bangladesh by removing various trade

barriers among these countries. Liberalisation of border trade has positive

implications in the economic prospects of north ~tern region (The Assam Tribune

2007).

Nevertheless, the Northeastern region, apart from being economically weak

and geographically isolated, there are various obstacles like inadequate infrastructural

facilities, finan<?e and trained men power in' the development of the region.

Therefore, keen to promote balanced regional development, the Indianj government "

has given utmost priority on the development of infrastructural facilities in the region.

Since transportation bottleneck has remained a major problem in the Northeast,

174

. '

emphasis has also been given on substantial improvement of road communication

system. The statement of Indian External Affairs Minister, Pranab Mukherjee calling

on Thailand to invest in the infrastructural development of the Northeastern states

corroborate this point.· External Affairs Minister, Pranab Mukhetjee said, "The idea

of a road link between India and Thailand cannot but captivate one's imagination. For

India it would mean road connectivity with all of ASEAN. For Thailand it would

mean road connectivity with a market of more than a billion people." (Nagaland Post

2007). The Union Minister for Development of North. Eastern Region (DONER),

Mani Shankar Aiyar while delivering the valedictory address on October 9, 2007, at

the concluding session of the three-day conference on Northeast, "underlined the need

for a shift in policy towards China and Bangladesh to enable the Northeastern States

to reap the benefits of the Look East Policy" (Aiyar 2007). And to ensure multiple

connectivity steps have also been taken to improve railway and air services .

Japan

The history of ASEAN-Japan relations as stated by His Excellency Domingo

L. Siazon Jr., Secretary of Foreign Affairs Republic of the Philippines, started "more

than a quarter of century ago." Further, he is of the opinion that it was only after "the

end of the Vietnam War in 1975 and the first ASEAN Summit held in Bali in 1976,"

that Japan-ASEAN relation was regenerated (Siazon 2000).

Similarly, the Ministry of Foreign Affairs of Japan reported that Japan's

fonnal relationship with ASEAN dated back to 1977, when then Prime Minister

Takeo Fukuda met with ASEAN leaders at the organisation's second summit meeting

in Kuala Lumpur. The ministry further stated that "since that time, Japan and ASEAN

forged a robust partnership that has contributed significantly to the region's economic,

.social, and political development" (Japan, Ministry of Foreign Affairs 2007). J apan­

ASEAN relation was further strengthened by the "New Partnership for Peace and

Prosperity" announced by then Prime Minister of Japan, Nobuo Takeshita and his

ASEAN counterparts in 1987 (Japan, Ministry of Foreign Affairs 2007).

Japan remains the second most important trading partner of the ASEAN states , and' the most important source of Official Development Assistance. Japanese

Government has surmounted the private enterprise for the economic d~kelopment in

the region by launching the Indo-China Development Forum (lDF), based on the idea

proposed by Mr. K. Miyazawa,. the then Prime Minister of Japan in ] 993 at an

175

ASEAN meeting. The main objective of establishing this international forum was to

support "open regionalism in the region" mainly "for the industrial co-operation

among the Indo-China countries and Myanmar." Subsequently, a Worldng Group was

started by the ASEAN Economic Ministers (AEM) and MITI at a meeting held in

Chiangmai (TIlailand) in September 1994. The AEM-MITI meeting also confinned

that ASEAN and Japan would co-operate in the economic development of the region

especially in the Indo-China countries and Myanmar. The Miyazawa Plan of 1998

made available a sum ofUS$ 30 billion as a liquidity provision to help the recovery of

the economic crisis in the region. A series of bilateral swap arrangements with

Malaysia and Thailand have helped fortify the currencies of these countries

(Ravenhill 2002: 187). The Japanese see the opportunities for investment in the

region as something not ripen enough, not only in infrastructure but also in the

broader framework for co-operation among the GMS countries. The Japanese view

has been very explicit that their benefit lies in the more or less economic core of the

GMS."

Japan's finn economic relati.on with the ASEAN countries was clearly

manifested during the Southeast Asia economic crisis that hit the region. Japanese

government in quick succession "launched the Miyazawa Initiative, the Hashimoto

Initiati ve and the Obuchi Plan to stave off further damage from the crisis and to lay

the foundation for recovery and sustained growth in crisis-affected countries" (Siazon ,

2000). Further, Japan created the Japan-ASEAN Solidarity Fund in 1999 and the

Japan-ASEAN General Exchange Fund (JAGEF) in 2000. In 2001, the ASEAN-Japan

Eminent Persons Group produced a vision for Japan-ASEAN Relations in the 21 st

Century that proposed expanding co-operation to include international issues such as

" UN reform and the WTO (Japan, Ministry of Foreign Affairs 2007)

During the Asian financial crisis, Japan provided more aid to Southeast Asia

than any other country. According to statistics, since the outbreak of the Asian

financial crisis, the Japanese administration has issued the "Asian Aid Programme"

and "New Miyazawa Initiative" to provide Southeast Asian countries with a total of

US$ 80 billion aid. By the end of 1999, Japan had implemented US$ 43 billion of its

programmes (Si Wei 1999:1). As a result, the ASEAN countries considered Japan as

the most important player during the Asian financial crisis. Besides, J~an's economy . "

also has a great impact on the economy of the ASEAN countries. As a result, the

ASEAN countries, though critical of the Japanese role in the region, expect the latter

176

to revive its domestic economy as soon as possible and recover its vitality as the

leader of Asia's economy. Bhubhinder Singh expressing similar views asserted that,

'despite ASEAN's severe criticisms of Japan's role during the economic crisis,

ASEAN countries do perceive Japan as an important economic partner. ASEAN

countries realised the need for the economic presence of Japan in the region, not only

to help revive their ailing economies, but also to help restore their previously dynamic

growth rates' (Singh 2002: 291).

The 1997 Asian financial crisis also highlighted the inter-dependence of the

region's economies and led to' the establishment of the ASEAN+3 (Japan, Korea, and

China) Framework. John Ravenhill (2002: 187) stated that "although Japan was first

to seize the initiative, with its proposals for an Asian Monetary Fund, more recently "

China has led the debate in the trade field with a proposal at the ASEAN Pl.us Three

(Japan, Korea, and China) Summit in 2000 for the creation 'of a free trade "zone

between China and ASEAN" (Ravenhill" 2002: 179). With the change of World

political environment, Japan and ASEAN have turned their attention to tackling trans-

" national challenges affecting the region;' During his first meeting with ASEAN.

counterparts in 2001, Prime Minister Junichiro Koizumi urged "greater co-operation

on global issues such as counter-terrorism, anti-piracy, environmental protection, and

preventing the spread of infectious diseases" (Japan, Ministry.of Foreign Affairs

2007).

A controversial issue has been the plan linking future aid to countries in the

region to a "series of benchmarks" which include respect for human rights, the

environment, positive moves towards democracy and a market economy. This was

, made clear when Japan laid out its new aid policy towards Vietnam (Channel News

Asia, June" 3, 2004). Aid conditionalities have always been a problem in relations

between Japan and Southeast Asia, more so as the benchmarks being set by Japan can

be deemed to be instrusive and constitute interference in the internal affairs of a

sovereign nation. William Long argues that this is part of a "new security manifesto"

that indicates a new role for Japan as an international actor (Long 1999: 329).

At the same time, recent debates within ASEAN concerning the lack of

responsiveness of Myanmar to calls from within ASEAN itself to ease upon

opposition groups may indicate that thi~ policy may not necessarily be seen as overly

intrusive. It is more likely that there will be some statements that criti~se Japan from

some ASEAN states, particularly the newer members, but it will not lead to harsh

177

condemnation from the rest of ASEAN. These benchmarks can also be seen as part of

the Japanese strategy of strengthening its bilateral relations with Southeast Asia

(Gilson 2004: 90). Prime Minister Junichiro Koizumi pointed out that the

fundamental basis for co-operation between ASEAN and Japan should be based on

"undertaking refonns in our respective countries" to ensure that both "will advance

individual1y and jointly towatd increased prosperity" (Koizumi 2002). This indicates

that Japan will deal with each ASEAN state individually but within a multi-lateral

framework. This seems to hark back to the duality of national and regional resilience

that the ASEAN states had always referred to in the. early years of the association. It

is, however, much more than this as it implies a more active involvement of Japan in

enhancing processes of co-operation. While the issue of human rights and democracy

may continue to be .controversial concerns across most of the ASEAN member states,

the emphasis on market reform is universally acceptable.

Any increase in the economic dynamism of Japan is welcomed by the ASEAN

states, particularly if this facilitat~ the strengthening of East Asian regionalism. Julie

Gilson argues that this is precisely the direction that Japan is taking. Japan is

increasingly using a regional multi-lateral framework (even as aspects of it demand a

bilateral approach) made feasible by "the greater acquiescence of regional partners"

.. (Gilson 2004: 91). It is this idea -of greater acceptance by its regional, in this case

Southeast Asian, partners that is new in this environment of co-operative endeavour.

And this is more evident in the area of security co-operation.

One of the most important developments in ASEAN-Japan relations is the

decreasing centrality of history as a factor (Yang 2003: 317). Jian Yang noted that the

ASEAN states have generally become more relaxed about the idea of Japan becoming

a political power, even a military one. He warns though that ASEAN should remain

sensitive to China's sensitivities on this issue and "not take a strong position on the

historical dispute between China and Japan" (Yang 2003: 317-18). China will

certainly react to this· development and some countries in Southeast Asia will

probably seek greater re-assurance from the United States to ensure that Japan will

continue to behave peacefully. It would not be surprising if countries such as the

Philippines, Singapore and Thailand continue to call for the continued maintenance of

its military presence in the region. It will push atleast these ASEAN/tates towards

even closer security relations with the United States and invite tension"with China.

178

The increasing importance of Japan as a partner in regional security is one of

the most important development that revolve around ASEAN-Japan relations. The

nature of the relationship is such that it continues to build on what is evidently

growing confidence and trust. The obvious competition between Japan and China for

regional leadership has been beneficial to the growth of regionalism in East Asia in

general, and Southeast Asia in particular. While sensitivities between China and Japan

make it imperative for the ASEAN states to carefully manage their relationship with

these two powers, the institutionalisation of co-operative mechanisms and the support

that both China and Japan have given to the process of regional is at ion makes the work

. of ASEAN lighter.

Before the I990s, most ASEAN countries expected Japan to only playa role

in the economy. But in recent years, things have be~n to change. More and more

ASEAN countries began to agree that Japan could play an important role in politics

and security of Southeast Asia in order to 'balance the other rising powers.W ong Kan

Seng, former Foreign Minister of Singapore, stated, "Japan has participated actively

in ASEAN's politics and secUlity; it means that Japan-A SEAN relations are becoming . .

more and more mature" (Wong 1999).

The official premise behind the current relationship between the ASEAN

states and Japan is laid out in the 2003 AS·EAN-Japan Plan of Action (ASEAN

Secretary). Three main areas of co-operation are emphasised here. First is

strengthening the process of integration being undertaken within ASEAN. This

includes reducing the gaps in capacity and economic development between the older

members of ASEAN and the newer ones. Second, co:.operation between Japan and

ASEAN is being geared towards enhancing the competitiveness of the ASEAN·

countries. In this context, economic partnerships are being established with assistance

provided by Japan in order to promote education, human resource development and

. institutional capacity building within ASEAN itself. Finally, events since II

September 200 I have accentuated the significance of trans-national issues,

particularly terrorism and piracy. ASEAN and Japan have agreed on enhancing co­

operation in this area primarily through institutional and human capacity building

with particular emphasis on law enforcement agencies. The issues given prominense

here indicate two things: the continued importance of economic co-operation, which

has always been the fulcrum of ASEAN-Japan relations, and the increasing

. prominence of security co-operation in this relationship.

179

Japan initiated a series of actions in 2003, two of which are influential. The

first was to launch the "ASEAN-Japan Exchange Year 2003", In November 2002, at

the Japan-ASEAN Summit, Japanese Prime Minister Junichiro Koizumi suggested

2003 as the "ASEAN-Japan exchange Year," which aims to push ASEAN and Japan

to "go forward together, improve together." Japan's other step was to enhance its

relations and deepen consultation on economy, politics, security and cultural

exchanges with ASEAN countries. They signed a series of treaties and agreements on

the above basis.

Japan also plays an important role in ASEAN's strategy of balance of power.

ASEAN expects Japan to be more active in the political, military and security fields,

as it continues to play an important role in economy. ASEAN hopes that Japan will

speak for ASEAN at the G-7 Summit, and. ASEAN is willing to support Japan to

become a pennanent member in the UN Security CounciL Some of the ASEAN

countries 'also believe that Japan need to be not only introspective about its history; it

has much room to co-operate with ASEAN countries on politics, military and

. security.

United States of America

The relationship between ASEAN and the United States has, since the attacks

on the World Trade Centre and the Pentagol1<on II September 2001, been dominated

by concerns over terrorism. Jonathan Pollack noted that in President George Bush trip

to the region for. the 2003 APEC Summit in Bangkok, he dealt primarily with

international terrorism (Pollack 2004: 10-11). He did renew the commitments of the

United States to the economic development of the region but indicated the primacy of

the war on terror in emphasising that greater security collaboration especially against

terrorism will lead to increased trade and investment. In the wake of the events of II

September 2001, the Bush administration met collectively with the ASEAN states on

26 October 2002 to discuss the Enterprise for ASEAN Initiative (EAI). The idea

behind the initiative was to promote the growth of free trade in the region and the

strengthening of the involvement of the United States in the region (International

Herald Tribune, November 4; 2002).

Closer ties with the region were seen as means towards opening up markets

and help redirect investment into Southeast Asia. The United State/ has already

established trade and investment agreements with Indonesia, the Philippines and

180

.'

Thailand, with Brunei indicating its interest. Again, it has concluded a Free Trade

Area (FT A) agreement with Singapore that it hopes will be a model for other FTAs

, around the region.

The need for the United States as a balancer is unprecedented for ASEAN.

ASEAN considers that only the United States has enough power to balance an

increasingly powerful China. Lee Kuan Yew pointed out in a speech in 2001 that

China will develop rapidly in the following decades. By 2040, China and Japan's

combined GDPwill exceed that of the United States. These developments will shift

the economic center of graVity of the world from the Atlantic to the Pacific. China

will be a formidable player in the region. No combination of other East Asian

economies - Japan, South Korea, Taiwan and ASEAN will be able to balance China.

The Russian Federation will not be a major player for at least another 20 years.

Therefore the role of America as the balancer is crucial if ASEAN has 10 have elbow

room for itself (Yew 2001: 20).

There are three positive meanings for the enhancement of US military and

security presence 'in Southeast Asia. First, it is beneficial to maintain the balance of

power in Southeast Asia. The American withdrawal of its last troop' from the

Philippines in 1992 left a huge power vacuum in Southeast Asia. The countries which

'have their interests in this, region comp<1ted to fill the vacuum created by the "

withdrawal of the US and their actions led to the imbalance of power. If this situation

,exists for a long period of time, it would undoubtedly affect the stability and peace of

this region. Second, it could contain the "'counter-disarmament" which has emerged in

Southeast Asian countries since the end of the Cold War. At the beginning of the'

1990s, as the US military presence decreased, Southeast Asian countries felt an

increasing sense of insecurity. They accelerated their national defence modernisation

programmes respectively. The military expenditure of some countries has increased to

a great extent. All these phenomena caused, a contrary situation to the global

disarmament, which was called "'counter-disarmament". Since the outbreak of the

Asian financial crisis, owing to internal economic difficulties, most Southeast Asian

countries have slowed down their national defence modernisation. However, with the

recovery of their economy, the re-inforcement of a U.S. military and security presence

in this region can somewhat contain this tendency. . '

Third, a US military and security presence in this regiOII can promote

Southeast Asian countries' fight against terrorism, contain Islamic fundamentalism,

181

and safeguard their unification and social stability. Peace and prosperity in Southeast

Asia fit China's interests as it also needs a peaceful, stable and prosperous Southeast

Asia just as America does. It is often said that Chin.a needs a stable peripheral

environment to develop its economy. The fact is that if Southeast Asia attains

stability, then a large part of China's neighbours will be stable. On this point, the

strategic interests of the United States and China are mutual (Yunhua: 125).

/

182

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